Saudi GDP growth speeds up in Q3, non-oil sector still slow

Riyadh earlier released a state budget for 2019 that would increase spending by 7 percent from this year’s actual level. (AFP)
Updated 31 December 2018
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Saudi GDP growth speeds up in Q3, non-oil sector still slow

  • The Saudi economy has been hit hard in recent years by low oil prices and state austerity measures to curb a huge budget deficit
  • Growth in the non-oil sector slowed to 2.1 percent from 2.4 percent

DUBAI: Saudi Arabia’s economy grew in the third quarter at its fastest rate since early 2016, boosted by expansion of the oil sector while non-oil growth stayed sluggish, statistics agency data showed on Monday.
Gross domestic product grew 2.5 percent from a year earlier. That was an acceleration from the second quarter, when GDP rose 1.6 percent, and the fastest since the first quarter of 2016, when the same rate was registered.
The Saudi economy has been hit hard in recent years by low oil prices and state austerity measures to curb a huge budget deficit. In 2017, it shrank for the first time since the global financial crisis nearly a decade earlier.
Monday’s data suggested the recovery from that slump was still tentative. GDP growth picked up largely because of higher oil output. The oil sector expanded 3.7 percent from a year ago in the third quarter, after 1.3 percent in the second.
Growth in the non-oil sector, key for job creation and Saudi Arabia’s effort to diversify its economy, slowed to 2.1 percent from 2.4 percent.
Saudi officials have predicted a gradual acceleration of the non-oil economy next year. Bank lending to the private sector rose 2.3 percent from a year earlier in November, its fastest growth since 2016.
This month Riyadh released a state budget for 2019 that would increase spending by 7 percent from this year’s actual level. Investment spending and bonuses for state employees in the budget could revive the private sector.
But senior officials have refused to rule out further austerity steps next year, including a planned hike in fees for hiring foreign workers and a possible increase in domestic fuel prices. Such steps have weighed heavily on private sector firms.
Meanwhile, global producers agreed early this month to cut oil production in an attempt to prop up prices. Saudi Arabia said it would cut output in January by almost 5 percent from December, which would shrink the oil sector and dampen headline GDP growth.


Time to tear down Mideast trade barriers, Davos panel hears

Updated 23 January 2019
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Time to tear down Mideast trade barriers, Davos panel hears

  • Mohammad Al-Tuwaijri, Saudi minister of economy and planning, said a move to ease movement of traffic across the border could be followed elsewhere
  • Majid Al Futtaim CEO Alain Bejjani: Now there’s this seriousness between Saudi Arabia and the UAE, I hope it gets to frictionless trade

DAVOS: Amid global trade wars and the rise of protectionism, Middle East economic and business leaders on Tuesday issued a clarion call for the exact opposite: To ease customs restrictions in the region.
A panel at Davos heard how an agreement between Saudi Arabia and the UAE to boost cooperation — including the reduction of obstacles to trade across the shared border — could be a blueprint for the wider region.
Mohammad Al-Tuwaijri, Saudi minister of economy and planning, said a move to ease movement of traffic across the border — partly through the use of technology — could be followed elsewhere. “We want to establish a reference for others to follow,” he said.
Alain Bejjani, CEO of retail and leisure group Majid Al Futtaim, said “frictionless trade” would give the region a boost.
“Now there’s this seriousness between Saudi Arabia and the UAE, I hope it gets to frictionless trade,” he told Arab News on the sidelines of the Davos forum.
Bejjani declined to say whether that would involve a customs union, a common market or a common currency. Given the imposition of trade tariffs between the US and China, and the rise of Brexit, globalization — something espoused by many Davos delegates — is seen as on the wane.
But Bejjani said breaking down barriers in the Middle East could help it better compete with Western Europe and the US.
“For the past almost century now… we’ve been ingeniously working on making sure we put barriers across the Arab world. The reality is we have a market that’s as big as most of the largest markets in the world… if we’re smart enough to work together,” he told the Davos panel.
Khalid Al-Rumaihi, chief executive of the Bahrain Economic Development Board, agreed that Saudi-UAE cooperation was “a great template” for others to follow.
Aside from “opening up” Middle East markets, Al-Rumaihi said harmonizing regulation in the region would also be beneficial to businesses and entrepreneurs.
“If the rules are changing in each country, if they’re not harmonized, it’s very difficult… for an entrepreneur (to understand) the regulatory environment. So they don’t scale very quickly, and that’s something we need to solve,” he said. Talk of freer trade within the Middle East is especially relevant when it comes to the Palestinian territories, which are subject to Israeli occupation and blockade.
Palestinian Prime Minister Rami Hamdallah said freer movement and a reduction of duties would help the economy grow.
“We need to see our products being waived (of) customs,” he said. “We need mobility — we’re under occupation.”